Are smallholder farmers willing to pay for different types of crop insurance? An application of labelled choice experime
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Are smallholder farmers willing to pay for different types of crop insurance? An application of labelled choice experiments to Chinese corn growers H. Holly Wang1,2 · Lu Liu3 · David L. Ortega4 · Yu Jiang5 · Qiujie Zheng6 Received: 6 January 2019 / Accepted: 2 September 2019 © The Geneva Association 2019
Abstract Crop insurance is the most common agricultural risk management instrument. In developing countries, crop insurance is becoming popular but is often provided with lower coverage, lower premiums and less subsidy than in developed countries. We use a labelled choice experiment method to investigate Chinese smallholder corn growers’ preferences for alternative types of insurance. In addition to traditional yield insurance, we assess farmers’ willingness to pay for coverage levels in price, revenue and weather index insurance, which are currently at the experimental stage in China. We find farmer preferences for these various types of insurance to be heterogeneous. On average, farmers are willing to pay for all types of insurance and for additional coverage but only at the current high subsidy level. We explore heterogeneity in willingness to pay and find that farmers’ positive past insurance experience plays a very important role in their demand for insurance. Keywords Crop yield insurance · Weather index insurance · Revenue insurance · Price insurance · Labelled choice experiment · Willingness to pay
* Lu Liu [email protected] 1
Center of China Western Development Capacity Research, Guizhou University, Guiyang, China
2
Department of Agricultural Economics, Purdue University, West Lafayette, USA
3
Institute of Agricultural Economics and Development, Chinese Academy of Agricultural Sciences, Beijing, China
4
Michigan State University, East Lansing, USA
5
China Academy for Rural Development, Zhejiang University, Hangzhou, China
6
University of Alaska Anchorage, Anchorage, USA
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H. H. Wang et al.
Introduction Crop insurance is the commonly used risk management instrument globally for farmers to mitigate economic losses caused by adverse natural and market conditions. To support food supply and farmer income, crop insurance programmes are heavily subsidised by governments in developed countries (Coble and Barnett 2012; Mahul and Stutley 2010). With limited government resources in underdeveloped countries, crop insurance programmes are sometimes subsidised by international non-governmental organisations on small scales or not provided at all (Nieuwoudt 2000; Skees and Barnett 2006; Fonta et al. 2018). In emerging economies, governments are starting to establish crop insurance programmes to support their low-income farmers with subsidies, hoping to improve the competitiveness of their agricultural sector and the domestic food supply (Mahul and Stutley 2010; Boyd et al. 2011a, b; World Bank 2011). As the top producer of many agricultural commodities, China features a large number of small-scale farms, a primitive rural financial system and a low level of farmer education (Le
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